News That Matters

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The president of Germany’s powerful Bundesbank has firmly rebuffed international demands for decisive intervention in the bond markets by the European Central Bank to combat the eurozone debt crisis,


Barclays’ finance director has called for an overhaul of “opaque and complex” accounting rules that artificially boosted the profits of big European and US banks by billions of pounds in the third quarter of this year.


Japan’s economy expanded strongly between July and September, returning to growth after three consecutive quarters of decline, according to a government preliminary estimate released on Monday, the FT reports.


Mario Monti was handed the task on Sunday night of forming an emergency government led by technocrats as Italy’s head of state raced to win broad political consensus before financial markets opened on Monday,




Policymakers are considering ways to buy troubled government-guaranteed mortgages from a new refinancing programme in case investors balk, people familiar with the matter have told the FT. Mortgages refinanced under the Home Affordable Refinance Program,


Ever since Vladimir Putin announced in September that he planned to run again for Russia’s presidency next March, one big question has arisen: what kind of Mr Putin will he be? People have speculated about a possible “Putin 2.0” – a more reformist president than the hawkish figure who shifted to the prime minister’s job four years ago. That might better suit a much richer Russia than the country he took charge of a decade ago, but which must now seek new sources of growth.

Asian stock markets rose Monday on some signs of stability in Europe, with cyclical and financial plays leading the region’s advance, while a positive third-quarter economic growth reading boosted sentiment in Japan.  Japan’s Nikkei Stock Average rose 1.1%, Australia’s S&P/ASX 200 gained 0.6%, South Korea’s Kospi Composite added 2.1% and India’s Sensex advanced 0.9%. Hong Kong’s Hang Seng Index added 2.4%, while China’s Shanghai Composite rose 1.6%. Dow Jones Industrial Average futures were up 64 points in screen trade.


Mounting concerns over the euro-zone crisis are prompting some of the world’s largest banks, including U.S. banks, to release more information about their exposure. Even so, the flow of new data has so far failed to put worries to rest, partly because of investor doubts about how well banks’ hedging strategies might work in the event of a euro-zone financial shock. J.P. Morgan Chase & Co. and Goldman Sachs Group Inc., in regulatory filings this month, published tables detailing their exposures to Portugal, Ireland, Italy, Greece and Spain—figures they didn’t include in previous quarterly filings. Morgan Stanley‘s third-quarter earnings report for the first time outlined European lending and trading positions in those five plus France.


When the recession squeezed Miami’s budget in recent years, officials reached into funds raised for road repairs and other projects to plug the shortfall. Now, the city is paying a price. The moves triggered lawsuits and a federal investigation, in a brouhaha that holds ramifications for how municipalities nationwide maneuver around unprecedented money problems. Cities and states across the country are using money designated for specific purposes—such as fixing roads or sewers—in order to fill financial holes elsewhere, according to public officials and records. The moves are exposing municipalities to controversy, as federal regulators and local auditors are more heavily scrutinizing their finances to protect bond buyers and taxpayers.


Greeks overwhelmingly welcomed the appointment of Lucas Papademos as prime minister and expressed their support for the new coalition government he heads, several opinion polls showed Sunday.  According to three separate polls, the choice of Mr. Papademos, a former vice president of the European Central Bank, was considered a positive step by three quarters of Greeks. The polls showed that between 72.9% and 79.1% thought his appointment was either a “positive” or “probably positive” step for the country.

Gold futures rose in electronic trading Monday, supported by a weaker dollar and matching gains for the broader metals complex. Gold for December delivery rose $6.90, or 39 cents, to $1,795.10 an ounce on the Comex division of the New York Mercantile Exchange during Asian trading hours.  The advance came amid a weakening dollar, with the dollar index , which tracks the U.S. unit against a basket of six major rivals, falling to 76.865, from 77.227 in North American trade late Friday.


Benchmark U.S. crude-oil futures edged higher in electronic trading Monday, as developments in Europe strengthened appetite for risk assets, and as the dollar weakened. Crude for December delivery added 6 cents, or 0.1%, to $99.05 a barrel on the New York Mercantile Exchange during Asian trading hours. Oil had closed out Friday’s North American session with a 5% gain for the week, settling at $98.89 a barrel.

President Barack Obama told China on Sunday that the United States was fed up with its trade and currency practices, as he turned up the heat on America’s biggest economic rival at an Asia Pacific summit. “Enough’s enough,” Obama said bluntly at a closing news conference at the annual Asia-Pacific Economic Cooperation meeting where he scored a significant breakthrough in his push to create a pan-Pacific free trade zone.


Canada will try to sell more of its energy products to Asia after Washington delayed a decision on whether to approve the Keystone XL Canada-to-Texas oil pipeline project, Prime Minister Stephen Harper said. “This does underscore the necessity of Canada making sure that we are able to access Asia markets for our energy products,” Harper told reporters on Sunday at the Asia-Pacific Economic Cooperation leaders’ meeting in Hawaii.

The world economy is facing “significant downside risks” stemming in part from the European debt crisis, leaders at the Asia-Pacific Economic Cooperation forum said. Growth and job creation have weakened in many countries and further trade liberalization is “essential” to boost economic expansion, the leaders said in a statement in Honolulu today. A series of natural disasters in the region has also threatened growth, they said, without elaborating.


German Chancellor Angela Merkel said it’s time to move toward closer political union in Europe to send a message to bondholders that euro-area leaders are serious about ending the sovereign debt crisis. Speaking on the eve of her Christian Democratic Union party’s annual congress in the eastern German city of Leipzig, Merkel said that she wants to preserve the euro with all current 17 members. “But that requires a fundamental change in our whole policy,” she said. “I believe this is important for those who buy government bonds: that we make it clear that we want more Europe step by step, that is that the European Union, and the euro area in particular, grows together,” Merkel said in an interview with ZDF television late yesterday. “Otherwise people won’t believe that we can really get a handle on the problems.”


Earlier this month, Prime Minister Silvio Berlusconi told reporters what he thought of the risk to Italy’s solvency as the European debt crisis sent bond yields toward euro-area records, and who he thought should fix it.  “Restaurants are full, it is difficult to reserve a seat on a plane, resorts during holidays are fully booked,” he said at a Group of 20 meeting in Cannes, France. “We really are a strong economy. I can’t see another figure on the Italian scene capable of representing Italy on the international stage. I feel obliged to stay on.”


John Moorlach, who became treasurer of Orange County, California, after it filed the biggest municipal bankruptcy in U.S. history in 1994, has some advice for the new record-holder, Jefferson County, Alabama. “What they might be able to learn from us is: Who can you sue for bringing you to this crazy place?” said Moorlach, who got $800 million in settlements from Merrill Lynch & Co., Standard & Poor’s, broker-dealers and bond counsel after the county’s investment pool lost $1.7 billion when bets on interest rates soured. Jefferson County, with more than $3 billion in sewer debt, follows Orange County in seeking court protection along with Vallejo, California, whose finances unraveled after the city failed to win labor concessions, and Harrisburg, Pennsylvania, which lost money on a trash incinerator.

Home prices are highly seasonal, due to the different mix of homes that sell at different times of the year, but the latest reading for September shows home prices are under added pressure now; this is not just due to the high concentration of distressed properties on the market. Prices fell 1.1% month to month, according to CoreLogic, both in seasonally adjusted and unadjusted terms. This is the second consecutive month of monthly drops, as we head into the slower fall season. The more concerning aspect of the report is that while home prices including foreclosures and short sales fell 4.1% from September of 2010, they still fell 1.1% when you exclude distressed sales.

Even billionaires can’t figure out how to make money in Indian aviation. Kingfisher Airlines Ltd., controlled by brewing tycoon Vijay Mallya, is expected to report a second-quarter loss today, following Kalanithi Maran’s SpiceJet Ltd. and Jet Airways (India) Ltd., the nation’s biggest carrier. All three companies have also slumped more than 65 percent in Mumbai this year. Indian airlines have failed to turn a 19 percent jump in passenger numbers into profits because of a price war, fuel taxes that average about 25 percent and the rupee’s 11 percent depreciation this year. State-owned Air India Ltd. can also offer below-cost fares after winning 32 billion rupees ($639 million) of government bailouts since a 2007 merger.

Former prime minister Tony Blair has told the BBC the collapse of the euro would be “catastrophic” – and Europe must get behind it. Mr Blair said he hoped it would not collapse, but European leaders faced “very difficult and painful” choices. A “long-term framework of credibility” was needed, he said, which included “strong fiscal co-ordination”.


Talks designed to cut the US deficit have reached a “difficult point”, but a deal is still possible, say members of a special super-committee. With a deadline of 23 November fast approaching, Republican Patrick Toomey told Fox News, “the clock is running out, but it hasn’t run out yet”. Democrat James Clyburn said he was hopeful a deal could be struck. The committee has to find $1.5tn (£930bn) in savings over 10 years. But members are split on party lines.


Spain’s economy registered zero growth in the third quarter of the year, latest official statistics indicate. Output between July and September was unchanged compared with the previous three months, and up just 0.8% from a year earlier. It follows a negligible growth of 0.2% in the previous quarter. Domestic spending continued to contract, the Spanish statistics office said, although this was offset by a rise in export demand.

Britain faces a miserable week of economic news, with the Bank of England expected to slash its growth forecasts, youth unemployment to breach 1m for the first time, and inflation to remain at a belt-tightening 5pc.  On Wednesday, the Bank is expected to cut its August forecast for 2011 growth from 1.5pc to around 1pc and roughly halve its previous 2.1pc prediction for next year – increasing the pressure on George Osborne to respond. The Chancellor is believed to be planning a £50bn building boom to avoid a recession, by bringing forward building works and backing private investment in infrastructure projects.

As Italy‘s president, Giorgio Napolitano, began hurried consultations on the formation of a new government, Silvio Berlusconi sent a clear message that he intends to return to power. The first politician summoned by the head of state arrived at the presidential palace at 9am sharp on the morning after Berlusconi was jeered and booed from office there by an exultant crowd of more than 1,000 people.

Figures showing falls in loans taken out by individuals and businesses provides support for the interest rate cut by the central bank earlier this month. The value of lending and finance lease commitments fell by 6.2 per cent in September, figures from the Australian Bureau of Statistics (ABS) showed. Within that, the numbers confirmed a small rise of 0.6 per cent in secured owner-occupier home loan commitments, already apparent from data released last week.


MALAYSIA’S gross domestic product growth this year will be closer to 5 per cent than 6 per cent amid a ”less than benign” global economy, says Prime Minister Najib Razak. Its economic expansion was expected to pick up in the third and fourth quarters after growing 4.6 per cent in the first half, Mr Najib said in Honolulu where he was attending the Asi a-Pacific Economic Co-operation forum. Malaysia’s central bank left interest rates unchanged this month, joining nations from South Korea to China in keeping borrowing costs steady to sustain spending at home,

Despite a fast economic growth China registered during the past years, economists projected the country to experience a lower pace of growth over the next few years. The coming slowdown will be a normal outcome as the continuous global downturn hurts China’s exports while the country striving to adjust its development pattern to wean the economy off its reliance on exports, said Li Yang, vice president of the Chinese Academy of Social Sciences, a government think tank. The two trends will continue in the coming years and weigh on exports, one of the three major engines that power China’s fast expansion — exports, investment and consumption, Li said Saturday at a forum held by Caixin Media, a business news group in China.


China’s Ministry of Commerce (MOC) on Friday forecast the country’s foreign trade to expand about 20 percent year-on-year this year to 3.5 trillion U.S. dollars. Foreign trade growth will slow in the following months of this year and in 2012 mainly due to “the complicated exterior environment,” the MOC said in a report.  Slackening recovery of the world economy, increasing risk of a downturn and rising costs at home will pose risks to China’s foreign trade, it said. China will continue to boost trade growth, adjust its trade structure and expand imports to contribute to global trade balance, the ministry said.


Australian Finance Minister Penny Wong on Monday renewed her warning of deep spending cuts in the upcoming mini-budget, as the government struggles to keep its pledge to return to surplus in the next financial year. The budget bottom line has been hit hard by the global economic downturn and the uncertainty over the stability of Greece and Italy. Senator Wong told ABC News that the federal government is determined to return to surplus on schedule in 2012/13.  However, she signaled that in order to achieve the surplus, the government will have to cut spending.


Iraq’s northern Kurdish semi- autonomous region will increase its crude oil exports to 175,000 barrels per day (bpd) next year, Kurdish regional Prime Minister Barham Salih said on Sunday. “We have agreed with the central government to increase the crude oil exports of the (Kurdish) region to 175,000 bpd in next year,” Salih told reporters at an energy conference in Erbil, the capital city of the Kurdish region. The region’s oil exports had reached 160,000 bpd in recent months after being resumed in February following a long halt due to a dispute with the central government.

The most conventional way of gauging the slowdown in the economy is to look at the downward revisions in the GDP forecasts for the year. The most optimistic of the official forecasters has pegged economic growth at no more than 7.7 per cent for 2011-12. Chances are that there would be further downward revisions as the year proceeds.  Many private forecasters are already betting on the economy growing at a much lower pace than what the official estimates suggest.


Speaking on the sovereign debt crisis in Europe and its possible impact on Indian exports, Union Finance Minister Pranab Mukherjee said here on Sunday that the economy was in a difficult situation with double digit inflation, particularly in food and fuel, “but we need not think of doomsday or that the whole thing is going to collapse.”  “Do not indulge in any sort of despondency or frustration. The government is with you and will stand by firmly to help industry and commerce and to put the economy on the path of high growth trajectory,” Mr. Mukherjee appealed to the industry at a conference organised by the Associated Chambers of Commerce and Industry in India (Assocham) on the “Global Economic Turmoil & India Economy – The Role of Banking Sector.”


Food inflation eased marginally to 11.81 per cent for the week ended October 29 from 12.21 per cent in the previous week but the fall brought no relief to the common man as prices of almost all edibles such as fruits, vegetables, milk and pulses continued to rule at high levels. The only solace that the WPI numbers appeared to offer to the consumer is that food inflation during the like week of 2010 was way higher at 12.68 per cent. As per official data, vegetables continued to rule dearer by 26.05 per cent on a yearly basis while prices of pulses were higher by 13.27 per cent, fruits by 11.70 per cent, milk by 11.79 per cent and cereals by 4.07 per cent. The protein-rich items also remained costlier by 12.74 per cent

Despite the uncertainties – nagging inflation, high interest rates, dip in corporate earnings – panelists speaking on India Market Watch 2012 at the WEF summit, exuded confidence on the Indian markets. A sustained 6%-plus growth coupled with stringent regulatory environment and strong corporate governance win the day for India even in times of global stress, according to panelists attending the meet. There are obvious worries such as slow reforms and corruption. But steady growth makes for compelling reasons to invest in Indian markets. In terms of corporate governance and transparency, Indian companies fare better than average Brazilian, Chinese and Russian companies, they said

South Korea’s terms of trade worsened to the lowest level in nearly three years in the third quarter as on-year gains in oil prices jacked up import costs, the central bank said Monday. The country’s net terms-of-trade index for goods came in at 78.7 in the July-September period, down 9.9 percent from a year earlier, the Bank of Korea (BOK) said in a report. The third-quarter data marked the lowest level since 75.1 in the fourth quarter of 2008. The on-year growth rate also was the sharpest fall since the trade terms declined 13 percent on-year in the fourth quarter of 2008. The index is calculated by dividing the export price index by the import price index. The base year is 2005 with a benchmark index of 100.

China’s President Hu Jintao said a big rise in his country’s exchange rate would not help the United States, in comments published on Sunday following a US warning over the level of the yuan currency. “Even if the yuan rises substantially, it will not solve problems faced by the United States,” Hu told US President Barack Obama in talks in Hawaii on the eve of a major Asia-Pacific summit, according to an account posted on the foreign ministry website. He said problems such as the US trade deficit and unemployment were not caused by China’s exchange rate, which he qualified as “responsible”, and added Beijing would continue to steadily push forward currency reforms.

Another great weekend reading by Things that make you go “hmmm”. This week’s anniversary of the tragic sinking of Big Fitz got me thinking about the Euro – another behemoth currently navigating some extremely choppy waters but managing to keep herself above water. Holding her own, if you will. The odds have been stacked heavily against the common currency for some time now and yet, despite a clearly unsustainable level of debt, several countries who should never have been allowed through the doors of the Eurozone, rapidly slowing growth and a group of basket-case politicians who have redefined the meaning of ineptitude, if you had shorted the Euro on January 7th of this year, you would now be staring at a loss of roughly 6% on your investment (chart, below).